Wednesday, August 21, 2013

Op-Ed: Pay It Forward Virginia! By Michael Abraham

Michael Abraham

Michael Abraham candidate for the 7th District House of Delegates

College graduates today face a mountain of debt, cumulatively in excess of $1 trillion.

One of our most treasured American values is social mobility, our traditional ladders to success. We take it for granted, but it is not universal, nor is it guaranteed. These days, many of those ladders have vanished.

Mobility is achievable only through education. To maintain a competitive economy in national and international markets, Virginia must properly educate its young citizens. We are in an era when higher education, either at a trade or community college or a university, is becoming essential to rewarding careers, financial success, and economic mobility. With the long-term decline in state funding for higher education, the escalating costs of attendance, the rising of interest loan rates, and stagnant family incomes, tuition is being pushed out of reach for middle- and lower-income learners. Many students are graduating with staggering loads of debt. It is critical that college is affordable to every American who is willing to study, attend, and graduate.

I have been unhappy with the lack of progress from the General Assembly in either reducing the overall cost of higher education or making payment options more viable and affordable. Thus, I have proposed what I plan to make as my first legislative proposal to the General Assembly. It is called Pay It Forward Virginia.

The Pay It Forward system was pioneered in Australia. The Oregon State Legislature has recently unanimously passed a bill which instructs their affiliated agencies to set criteria for a pilot program. It is being considered in Ohio, Washington, and other progressive states because it presents an advantageous new option for post-secondary affordability.

Here’s how works.

A contract is reached between the student and the state, whereby he or she pays no upfront tuition. Instead, he or she agrees to pay a percentage of earnings upon entering the working world for a period of several years, typically 20 to 30. For example, the rate may be set at 2%, meaning that if a graduate made $50,000, he or she would pay $1000 that year, or on $100,000 pay $2000. In effect, it is a tithing on future income.

This system provides many advantages over the conventional loan system:

  1. There are no tuition barriers.
  2. The payments are never burdensome, as they self-adjust to income. There are no defaulting or “under water” loans. The state is vested in the success of the students.
  3. Students can pursue work based on skills and interests, rather than financial burdens.
  4. Once seed-funded, the system self-perpetuates, as payments from graduates fund the system for new incoming students.
  5. The system allows for increased attendance as higher education is accessible to all motivated learners.
  6. Because college graduates traditionally find increased earnings in the workplace, society benefits and the state reaps more revenue from income taxes.

My daughter recently graduated from Virginia Tech. Her tuition as a percentage of our household income was four or five times greater than what my parents faced when they sent me there a generation ago. I fear that unless we act now, when the time comes, her children may not be able to go at all.

There are details to work out in the Pay It Forward system and initial funding options to consider. For example, the rate of repayment may vary from community colleges to universities. The duration of years of payment may vary. And the source of seed money must be considered and debated. But the system has real merit for positioning our state as a national leader in higher education, commensurate with our fine colleges and universities. And, it fulfills a major goal of public higher education, which is keeping it accessible to everyone who seeks it. Once the system is fully phased-in, it is entirely self-financing and makes higher education available to succeeding generations of students.

My recommendation would be to begin with a pilot program in the Community College system and then eventually expand it to our state universities.

Pay It Forward is not a loan. There is no debt and no compounding interest. It is an investment our state can make to our citizens.

Every investment has its costs. However, programs like the G. I. Bill have proven that investments in education prove to return many times over.

            I am convinced this is a great idea that will receive widespread support here in Virginia.


Michael Abraham is a businessman and author. He lives in Blacksburg. He is currently the Democratic Candidate for the Virginia House of Delegates, 7th District.

Posted By Valerie Garner

Categories: Election 2013, Elections, Politics, State Politics

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Comments (2)

John Hopkins

August 22nd, 2013 at 11:31 AM    

Good thinking! This idea has real potential to move Virginia forward.

Sam Rasoul

August 22nd, 2013 at 8:30 AM    

Great idea that has worked very well in Australia under conservative rule.

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